Deficits in long-term memory are thought to mark processes associated with the pathophysiology of schizophrenia and to participate in the development of impaired social and work functioning in these patients. A key limitation of prior work is that it has relied on clinical neuropsychological tasks that are poorly suited to address whether particular aspects of long-term memory are impaired. Here we propose a novel behavioral science strategy probing the functional architecture of long-term memory. The aims are to evaluate proposed functional dissociations between episodic and familiarity-based retrieval and between retrieval and encoding processes in long-term memory in healthy subjects and their possible differential relevance to symptom onset and functional deterioration in schizophrenia. Prodromal and FE schizophrenic patients, along with matched controls, will be examined with functional magnetic resonance scans in a longitudinal design, using a paradigm previously shown to discriminate between episodic and familiarity based retrieval in activating the hippocampus. We will also extend basic research by obtaining functional scans during the encoding phase of this experiment. We expect to detect prefrontal, parahippocampal, and hippocampal activity at encoding that predicts subsequent episodic memory in healthy subjects. We expect the patient groups to show impairments in behavioral and physiologic indices of episodic (as compared with familiarity-based) memory at encoding and retrieval, deterioration in which over time will be associated with an increased likelihood of schizophrenia onset and with poorer social and work outcome. The findings should help to clarify whether the long-term memory deficits in schizophrenia reflect a failure to encode contextual information at the study phase, a failure to utilize contextual information at the retrieval phase, or both, whether patients show abnormal activation of key components of the long-term memory circuit, and whether these behavioral and physiologic deficits predict the onset of schizophrenia over and above behavioral indicators of prodromal status and are differentially predictive of poor functional outcome. The findings could be used in future prodromal research to identify those at greatest risk and to develop interventions to prevent, attenuate or compensate for impairments in social and work functioning in schizophrenia.